(LEAD) Seoul, Tokyo agree to extend US$10 bln currency swap deal by another 3 yrs

Seoul and Tokyo have decided to extend their US$10 billion currency swap agreement by three more years, the finance ministry announced Thursday. The deal, set to expire next month, will now run through November 2029, as both nations aim to strengthen their economic ties. Finance Minister Lee Hyoung-il signed the extension with his Japanese counterpart, Satsuki Katayama, during a meeting in Bangkok on the sidelines of the IMF and World Bank 2026 Annual Meetings.

The three-year, US$10 billion currency swap arrangement, initially signed in December 2023, was set to expire in November. Under the latest extension, the agreement will remain in place, with the US dollar as the currency of exchange. Currency swaps are financial tools designed to mitigate financial instability by enabling a nation experiencing a liquidity shortage to borrow foreign currency in return for its own.

The two countries' swap arrangement, which saw its size expand from US$2 billion in 2001 to US$70 billion in 2011, lapsed in 2015 amidst declining bilateral relations.

The two nations had previously revived the arrangement in 2023, but with a revised structure based on the US dollar. South Korea can borrow dollars from Japan in exchange for Korean won, while Japan can do the same in exchange for Japanese yen. During the meeting, officials affirmed that both countries' foreign exchange authorities maintain sufficient liquidity, highlighting the currency swap agreement as a testament to bilateral cooperation.

They also discussed methods to enhance overall economic and financial exchanges, and agreed to hold a ministerial meeting in South Korea as soon as possible.